What happens if Congress does nothing on Social Security

People line up outside of the Social Security Administration office Feb. 2, 2005 in San Francisco, California.

There was some ominous news Monday for the roughly 11 million Americans who receive benefits under Social Security’s disability program: If Congress doesn’t act, the program’s trust fund will run out of reserves in just two years.

In practice that means a 19% cut in benefits if Congress does nothing by 2016, explained Marc Goldwein, senior policy director of the Committee for a Responsible Federal Budget. But will Congress do nothing? Only if it wants to. There are several options at lawmakers’ disposal, Goldwein said, including delaying checks. Borrowing from Social Security’s trust fund that pays retiree benefits is one option. Lawmakers could also raise the disability insurance payroll tax or cut spending for the program to ensure full benefits are paid.

What about for the Social Security retiree benefit program? After its trust fund is exhausted, trustees said payroll tax revenues could pay for three-quarters of scheduled benefits through 2088. To close the shortfall in the long term, trustees said one option is to raise the Social Security payroll tax to 15.23% from 12.4% today. Another, Goldwein said, is gradually raising the retirement age.

But there’s a reason these things haven’t been done before: “None of them are politically palatable,” said Goldwein.

Medicare’s finances were the best news of the reports on Monday. The trustees of its hospital insurance fund said that lower-than-expected spending extended the life of the fund by four years, to 2030. But they said after the fund is exhausted in 2030, Medicare would only be able to pay 85% of benefits. An increase in payroll taxes is one option to cover the shortfall, trustees said.

While those who rely on the Medicare hospital fund might be concerned by the projections, experts said they doubted Congress would let benefits be cut. “Medicare has always been facing these projections of insolvency, and it’s never happened,” said Paul Van de Water of the Center on Budget and Policy Priorities. Brian Collins of the Bipartisan Policy Center noted that Congress has stepped in to avoid cuts in the Medicare program in the past, such as when it has temporarily delayed cuts to doctor reimbursements.